Through The Crystal Ball

Tracking trends, reflecting on discussions, and creating new strategies with clients over the past few months have produced a list of themes that we predict are likely to be the focus of attention in the short to medium term. True to form, we’re sharing this information rather than treating this as confidential market intelligence as we hope this will get people thinking and talking. Here goes in chronological order – 10 predictions and a disclaimer:

More non-PSP work. Many contractors will decide to reduce their dependency on PSP revenue for all sorts of reasons. Timeframe: Ongoing. This will leave the field open to true PSP vendors who do nothing but.

More mobile capability. This is a no-brainer. Someone will figure out a way to match large fingers with tiny keyboards (voice commands, anybody?) and on-the-fly scoping and estimating will finally happen. Timeframe: Now. The technology is already out there.

PSP vendors will learn to do the limbo resulting in lower operating costs. The days of 45% gross margins are over. 35% to 40% is pretty much the norm now. There’s going to be a period of largely futile effort to protect the 35% threshold but that’s not going to happen in the PSP environment. Timeframe: 1 year. This is already well underway. Once PSP vendors accept this, they have two choices: cut back on operating costs (and there are definitely areas where ‘spot fat’ removal is an option) or leave PSPs and go direct to market.

More training. Much more training. Training for adjusters and training for frontline restoration staff (including the legions of cheerful but clueless salespeople that contractors send out to stupefy insurers into signing them up on PSPs). The key is relevant and consistent communication and cross training between insurers and their vendors. Timeframe 2 years. The industry has to move beyond the “Contractor Manual” and emailed notifications of change. It’s just too confusing and wasteful to produce dozens of pages of written instruction and then have to explain everything again and again. Perhaps fewer “marketing” people and more communication experts is the solution.

Full service contractors will extend their advantage over the classic GCs. However, ‘full service’ will come to mean something different as a number trades will be treated as non-core. Thus, flooring, roofing/siding, demolition, rebuilds, environmental, doors/windows will be dealt with direct by insurers. We believe contents will become a core service along with restoration work and will be handled in-house by full service contractors (that’s because technology is making contents restoration less complicated). Timeframe: 2 years. Already, there is growing evidence that full service contractors operate at lower overall cost compared to the sub trade-dependent GC. They will drive home this advantage.

Quality related to work performed and customer care will be more accurately and consistently measured and scorecards will largely become standardised across the industry. Timeframe: 2 years. We already have numerous scorecards in use with varying degrees of accuracy (the only real limitation being the quality of data available). Third party quality assurance trackers have an opportunity here.

Estimating software programs will develop full financial, operational and CRM capability and become true enterprise management tools. More importantly, users will deploy them intelligently. Timeframe: 5 years. Even if these programs are offered today, actual deployment in an effective manner will take years. Contractors and insurers have access to huge volumes of data. They don’t use them effectively.

Someone will figure out and offer preventative service (as opposed to restoration service). This is a tricky one but there’s a definite revenue and service opportunity here. PSP vendors are particularly well-placed to offer services to an insurer’s customers that reduce the likelihood of loss. Timeframe: 5 years. Likely to be focussed on eliminating structural water ingress.

Large loss/rebuilds will offer new opportunities. The building boom has created many more structures and average size and costs have risen. A lot of builders will be looking around once the boom subsides. Timeframe: 5 years. This is a small but lucrative segment of insurance claims.

CAT events will continue to occupy the nightmares of claims managers. The solution to how best to handle these events is some way off. Insurers cannot decide whether it is rock bottom costs or lavish service levels they want. You can’t have both. Part of the problem lies in trying to commoditise these events – it seems sensible to treat all CAT losses the same way as it is just too time-consuming otherwise. However, to do this properly requires a full mapping process that will expose true costs and actions. This is impossible without complete collaboration between insurers and their PSP vendors. Time frame: over 5 years. The solution does not lie in banging vendors over the head. But that’s a habit that’s proving hard to break.

Seven of these predictions will not come about in the manner or timeframe described above

Advertisement

Comments are closed.